Paul L. Caron

Friday, August 31, 2012

Florida Tax Review Publishes New Issue

Florida Tax ReviewThe Florida Tax Review has published Vol. 12, No. 7 (2012):

August 31, 2012 in Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

9th Circuit: Marilyn Monroe's Estate Forfeits Publicity Rights Due to Tax Planning

Milton H. Greene Archives, Inc. v. Marilyn Monroe LLC, No. 08-56471 (9th Cir. Aug. 30, 2012):

An enduring American celebrity, Marilyn Monroe continues to inspire both admiration and litigation a half-century after her death. At issue is whether appellants inherited a right of publicity, which was created and deemed posthumous by the states of California and Indiana decades after her death, through a residual clause in her Last Will and Testament. The will was subject to probate in the state of New York, which does not recognize a posthumous right of publicity. The issue of appellants’ rights turns on whether Monroe was domiciled in California or New York at the time of her death. We conclude that because Monroe’s executors consistently represented during the probate proceedings and elsewhere that she was domiciled in New York at her death to avoid payment of California estate taxes, among other things, appellants are judicially estopped from asserting California’s posthumous right of publicity. We therefore affirm the district court’s order so holding. ...

Because Monroe died domiciled in New York, New York law applies to the question of whether Monroe LLC has the right to enforce Monroe’s posthumous right of publicity. Because no such right exists under New York law, Monroe LLC did not inherit it through the residual clause of Monroe’s will, and cannot enforce it against Milton Greene or others similarly situated. We observe that the lengthy dispute over the exploitation of Marilyn Monroe’s persona has ended in exactly the way that Monroe herself predicted more that fifty years ago: “I knew I belonged to the Public and to the world, not because I was talented or even beautiful but because I had never belonged to anything or anyone else.” 

(Hat Tip: Bob Kamman.)

August 31, 2012 in Tax | Permalink | Comments (0) | TrackBack (0)

Competition Between Tax Havens: Does Proximity Matter?

Luisa Blancoa ITJ(Pepperdine University, School of Public Policy) & Cynthia Rogers (University of Oklahoma, Department of Economics), Competition Between Tax Havens: Does Proximity Matter?, 26 Int'l Trade J. 291 (2012):

We study whether proximity to the nearest tax haven affects FDI and the number of American affiliates in a tax haven. Our results show that distance to the nearest tax haven is positively related to FDI inflows and the number of American affiliates in tax havens. These findings suggest that there is harmful competition between tax havens. We also find evidence of positive spillovers: the number of American affiliates in a tax haven is positively related to the number of affiliates in its closest neighboring tax haven. This suggests the presence of agglomeration benefits given there is an affiliate in a nearby tax haven.

(Hat Tip: Greg McNeal.)

August 31, 2012 in Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

Tax Court Seeks to Hire Special Trial Judge

Tax Court Logo 2The Tax Court is accepting application through September 4, 2012 to fill a Special Trial Judge position (salary: $156,600):

In accordance with I.R.C. § 7443A(a), Special Trial Judges are authorized to hear and decide any case involving tax deficiencies of $50,000 or less (per taxable year), as well as any collection due process, declaratory judgment, employment classification, or whistleblower award case of any amount. Deficiency cases involving amounts greater than $50,000 may be assigned by the Chief Judge to be heard by a Special Trial Judge with the decisions to be entered by a Presidentially-appointed Judge, in accordance with § 7443A(b). More specifically, the duties of the position are demanding and wide-ranging and include the following:

  • Travel to approximately 75 U.S. cities to conduct trials and pretrial proceedings and decide cases as more fully described in § 7443A(b);
  • Responsible for promptly concluding action through written opinion, order, settlement, or other disposition of a large volume of cases in small case trial sessions assigned to the Special Trial Judge;
  • May be called upon to oversee the Court’s handling of motions received in cases in the general docket and to prepare orders and opinions disposing of those motions;
  • May be called upon to assist Presidentially-appointed Judges in the disposition of procedural matters, such as motions to conduct an in camera review of documents, and in the disposition of cases, such as by assisting settlement discussions;
  • Responsible for independently managing their caseloads and chambers effectively with the assistance of chambers staff;
  • May be appointed as an advisory member of any standing or ad hoc committee of the Tax Court as assigned by the Chief Judge of the United States Tax Court;
  • May be called upon to represent the Court by speaking before bar-related CLE programs, especially those designed to assist pro se taxpayers and attorneys who assist low income taxpayer clinics and calendar call programs which provide assistance for unrepresented petitioners; and
  • May perform administrative duties as assigned by the Chief Judge of the Tax Court.

Qualification Requirements: To be qualified and considered for appointment, an applicant must ... [h]ave been admitted to practice before and be a member in good standing of the bar of the highest court of any State, the District of Columbia, or any commonwealth, territory, or possession of the United States, and have been engaged in the active practice of tax law before the United States Tax Court or other Federal courts, or have served in private or public sector or academic positions providing experience relevant to practice before the United States Tax Court, or have other experience relating to Tax Court practice and procedure for a period of at least 5 years. ...

How to Apply:  All applicants must submit a resume to include all relevant employment history, as well as a cover letter describing both personal and professional attributes that exemplify superior qualifications for this position. All applicants must submit an original application package and six copies for review by a panel. Applications should be addressed “Personal and Confidential” to the attention of Ellene P. Footer, Director, Office of Human Resources, and submitted to Human Resources, Room 106, 400 Second Street, NW, Washington, DC 20217.

August 31, 2012 in Tax, Tax Prof Jobs | Permalink | Comments (0) | TrackBack (0)

CRS: Political Ads and the Tax Code

CRS LogoVia Election Law Blog and Bloomberg BNA:  Congressional Research Service, Political Ads: Issue Advocacy or Campaign Activity Under the Tax Code? (R42684) (Aug. 29, 2012):

The question of whether an advertisement has crossed the line into campaign activity is an important one under the tax laws, particularly for tax-exempt 501(c) organizations. There are two main reasons. First, 501(c)(3) charitable organizations (including churches and other houses of worship) are prohibited under the Internal Revenue Code (IRC) from engaging in campaign activity. They are, however, permitted to take policy positions and engage in an insubstantial amount of lobbying. Second, other types of 501(c)s—primarily 501(c)(4) social welfare organizations, 501(c)(5) labor unions, and 501(c)(6) trade associations—may engage in campaign activity. However, it (along with any other non-exempt purpose activity) cannot be their primary activity. This standard has been the focus of congressional and public scrutiny, as 501(c) groups have reportedly spent millions of dollars on campaign activity in the post-Citizens United era, and allegations have been made that some should have their status revoked for engaging in too much campaign activity. Whether an advertisement is campaign activity is key in this context because a “true” issue ad, as defined for tax purposes, would not be counted as campaign activity when determining whether revocation of 501(c) status is appropriate.

The standard for determining whether something is campaign activity under the IRC is whether it exhibits a preference for or against a candidate. Clearly, ads that tell people who to vote for or against are campaign intervention. However, in situations involving something short of express advocacy, this standard does not lend itself to bright-line rules. Preference can be subtle, and the IRS takes the position that it is not always necessary to expressly mention a candidate by name. As a result, the line between issue advocacy and campaign activity can be difficult to discern.

The IRS has released two rulings that provide a non-exhaustive list of factors the agency considers when determining whether an issue advocacy communication is electioneering. [Rev. Rul. 2004-6, 2004-1 C.B. 328; Rev. Rul. 2007-41, 2007-1 C.B. 1421.] The most important point to keep in mind is that the determination of whether an ad is actually campaign activity is entirely dependent on the facts and circumstances of each case. This requires looking at the ad in question, as well as being familiar with some of the organization’s other activities (e.g., has the group run a series of similar ads?) and the election (e.g., has the issue been raised to distinguish among the candidates?).

Finally, the term “issue advocacy” is also used when people talk about campaign finance law and policy. The terminology used in tax and campaign finance law and policy do not always match. Thus, it should not be assumed that the characterization or treatment of an activity for campaign finance purposes necessarily results in the same characterization or treatment for tax purposes, and vice versa.

August 31, 2012 in IRS News, Tax | Permalink | Comments (0) | TrackBack (0)

Britain Debates 0.5% Wealth Tax

Newman Posts Tax Papers on SSRN

Thursday, August 30, 2012

Cincinnati Law Faculty Create Scholarship Fund for Students

UC Logo Yet another reason why I love the University of Cincinnati College of Law and my colleagues:

Prospective students are well aware that a legal education can be a significant financial investment. What’s news at the University of Cincinnati College of Law is what professors have initiated to make things a little easier for students. They’ve established the College of Law Faculty Scholarship Fund.

Specifically, the College of Law Faculty Scholarship Fund will provide necessary financial support to our law students that will help offset the rising cost of legal education. To kick off this initiative, nearly $40,000 was raised, with the average gift exceeding $1,000.

“We have high hopes for this effort,” said A. Christopher Bryant, professor of law at the College and one of the initiators of the idea. “This faculty has always felt a very strong connection to our students. We also understand the realities of the legal profession today—and remember the anxiety we all felt when we were in law school. Creating this scholarship was an opportunity to show our support of them in a tangible form.”

Noted Bryant and Mark Godsey, the Daniel P. and Judith L. Carmichael Professor of Law and Director of the Ohio Innocence Project, law faculty were excited and very committed to participating in this venture recognizing the increasing pressures on students in terms of debt and the impact of a slowing economy.  As an important initiative of this year’s Faculty Staff Campaign, these efforts helped raise our faculty participation rate to 100%, making UC College of Law one of very few to achieve this high standard.

“We’ve long been proud of the strong relationships that exist between faculty and students at the College of Law,” said Louis D. Bilionis, dean at the College of Law. “Our professors care deeply about their students, and their initiative and generosity in establishing this scholarship fund shows how dedicated they are to making a positive, personal difference in the lives of their students.”

If you would like to join the Cincinnati faculty and this effort, see here.

August 30, 2012 in Legal Education | Permalink | Comments (4) | TrackBack (0)

Proposed Post-Tenure Review Policy Adds to Turmoil at St. Louis

St. Louis LogoOn the heels of the abrupt resignation of Dean Annette Clark and the selection of local practitioner Tom Keefe as Interim Dean (links below):  Chronicle of Higher Education, Faculty-Review Proposal at Saint Louis U. Would 'Eviscerate Tenure,' AAUP Says:

Faculty members at Saint Louis University are worried about a proposed post-tenure review policy that the American Association of University Professors says is written in a way that has the potential to endanger the tenure status of professors at the Jesuit institution.

"Post-tenure review should be for the purposes of assisting faculty members in improving their performance," says B. Robert Kreiser, associate secretary of the AAUP. "But the policy that has been proposed would effectively eviscerate tenure as it's understood at most institutions of higher learning."

At issue in the proposed policy, which is slated to take effect in January, are two of the potential outcomes it outlines for a post-tenure review. The proposal says that, following a review, professors could remain tenured or could be placed on a "performance improvement plan" with a re-evaluation in two years; both of those potential outcomes are typical in post-tenure reviews.

But the other options under the Saint Louis plan—moving faculty to non-tenure-track positions or giving them a terminal contract, in which they would be fired with a year's notice—are "of grave concern," said Mr. Kreiser, who has reviewed the policy. "This policy is certainly among the worst I've seen, and it's hard to imagine a policy that could be much worse than this one."

The policy also says that post-tenure review will be similar to the regular tenure-and-promotion process. Mr. Kreiser said that sends a message that "even though you have tenure now, we're going to review you as though you do not." ...

The proposed post-tenure-review policy became public at a time when the university had just responded to the highly publicized resignation this month of the dean of its law school. In resigning, Annette Clark, who had been hired just over a year ago, sent a letter to the institution's president, the Rev. Lawrence Biondi, and its vice president of academic affairs, in which she said that she lacked confidence in their ability to lead the university and that they weren't committed to the law school's success. She accused Father Biondi of a series of actions that "evinced hostility" toward her position, such as deciding, without consulting her, that the law school would move to a donated building downtown.

Father Biondi responded in a letter of his own that Ms. Clark was about to be fired on the same day that she resigned, August 8.

Prior TaxProf Blog coverage:

August 30, 2012 in Legal Education | Permalink | Comments (1) | TrackBack (0)

President Obama Addresses Law Student Loan Crisis

Above the Law, Barack Obama Takes Tt Reddit and Answers a Question About Law Student Debt… I Didn’t Say He Answered It Well:

QuestionI am recent law school graduate. Despite graduating from a top school, I find myself unemployed with a large student loan debt burden. While I’m sure my immediate prospects will improve in time, it’s difficult to be optimistic about the future knowing that my ability to live a productive life — to have a fulfilling career, to buy a house, to someday raise a family — is hampered by my debt and the bleak economic outlook for young people. I know that I’m not alone in feeling this way. Many of us are demoralized. Your 2008 campaign was successful in large part due to the efforts of younger demographics. We worked for you, we campaigned for you, and we turned out in record numbers to vote for you. What can I say to encourage those in similar situations as I am to show up again in November? What hope can you offer us for your second term?

President Obama's answerI understand how tough it is out there for recent grads. You’re right – your long term prospects are great, but that doesn’t help in the short term. Obviously some of the steps we have taken already help young people at the start of their careers. Because of the health care bill, you can stay on your parent’s plan until you’re twenty six. Because of our student loan bill, we are lowering the debt burdens that young people have to carry. But the key for your future, and all our futures, is an economy that is growing and creating solid middle class jobs – and that’s why the choice in this election is so important. The other party has two ideas for growth – more taxs cuts for the wealthy (paid for by raising tax burdens on the middle class and gutting investments like education) and getting rid of regulations we’ve put in place to control the excesses on wall street and help consumers. These ideas have been tried, they didn’t work, and will make the economy worse. I want to keep promoting advanced manufacturing that will bring jobs back to America, promote all-American energy sources (including wind and solar), keep investing in education and make college more affordable, rebuild our infrastructure, invest in science, and reduce our deficit in a balanced way with prudent spending cuts and higher taxes on folks making more than $250,000/year. I don’t promise that this will solve all our immediate economic challenges, but my plans will lay the foundation for long term growth for your generation, and for generations to follow. So don’t be discouraged – we didn’t get into this fix overnight, and we won’t get out overnight, but we are making progress and with your help will make more.

Elie Mystal is not impressed:

It would have been better if Obama had just said, “I feel your pain,” and moved on to another question. In fact, that’s what Obama should have said, because Obama is one of the people out there that knows or should know exactly what this person was talking about. He’s been in debt — law school debt. He and his wife. He could only go off and do his low-paying “community organizing” gig because Michelle Obama put in the hard work of going to Sidley and paying some freaking bills.

Obama would probably still be in debt NOW if he hadn’t written two best sellers. Was that his back up answer to this law student? “I know you are struggling right now. Why don’t you quit whining about it and write a best selling book about your life that catapults you to national prominence and pays off all you debts in the bargain? Slacker.”

I can only assume that Obama’s own experience has blinded him to the reality law and other graduates students are facing with their debts. ...

Obama has covered a lot of political ground with his capacity for empathy, but he shows none when it comes to student debts. He doesn’t have any serious policy ideas, he can’t even engage with a question about the issue, and he seems completely unaware that the cost of higher education has skyrocketed since he went to school. He makes his stand at the altar of getting loan money into the hands of students, and then looks the other way while colleges and universities gouge those students (and ultimately the federal government) for all they’re worth.

When this student loan bubble bursts (and it will burst), Obama will have to own the fact that he stood by and answered questions on Reddit while the student loan industry burned.

August 30, 2012 in Legal Education | Permalink | Comments (6) | TrackBack (0)

Hasen: Partnership Special Allocations Revisited

David Hasen (Santa Clara), Partnership Special Allocations Revisited:

Special allocations of items of partnership income, gain, loss and deduction have long created difficulties for the tax law. The paper argues that most such allocations should not be respected for tax purposes because they inappropriately separate the character of partnership items from the partners that are economically entitled to them. I suggest that special allocations instead ought to be viewed as transactions in partnership interests between or among the partners themselves. A number of consequences follow. I also argue that Treasury's rules for establishing the partners’ interests in the partnership when an allocation fails the test for substantiality are likely inconsistent with section 704(b) of the Internal Revenue Code.

August 30, 2012 in Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

Judge Denies Injunction in Case of D.C. Law Prof Denied Tenure After 25 Years

BrownBlog of the Legal Times:  In Tenure Fight, Judge Denies Injunction to Ex-Law Professor in D.C.:

A Washington federal district judge today denied a preliminary injunction request by a former professor at the University of the District of Columbia David A. Clarke School of Law who sued the school after she was denied tenure and fired.

U.S. District Judge Richard Leon didn't rule on the merits of Stephanie Brown's lawsuit, but found that she had waited too long to file her complaint to argue now that she would suffer immediate and irreparable harm without a court order.

Brown worked at the law school for 25 years as an administrator and law professor, according to her complaint. In 2009, she applied for tenure and promotion. The law school's Faculty Evaluation and Retention Committee voted in favor of her application and it was endorsed by law school Dean Katherine Broderick, but the application was ultimately denied in 2011.

August 30, 2012 in Legal Education | Permalink | Comments (0) | TrackBack (0)

Pew: 58% Say the Rich Should Pay More Taxes

Pew Research Center:  Yes, the Rich Are Different:

Pew 1

Another widely held perception of the rich is that they do not pay their fair share in taxes.

A majority of adults (58%) say that upper-income people pay too little in federal taxes. One-in-four (26%) say upper-income people pay their fair share in taxes, and 8% say they pay too much in taxes. Even among those who consider themselves upper or upper-middle class, fully 52% say upper-income people pay too little. Only 10% of this group says upper-class adults say people pay too much in taxes.

The public is divided over whether lower-income people pay the appropriate amount in federal taxes. Some 37% say lower-income people pay too much in taxes, while roughly as many (34%) say lower-income people pay their fair share in taxes. One-in-five adults say lower-income people pay too little in taxes. There is little agreement across social classes on this issue, with a plurality of lower-class adults (48%) saying lower-income people pay too much in taxes and a plurality (39%) of upper-income adults saying lower-income people pay their fair share.

When it comes to the middle-class tax burden, there is no clear consensus among the public. Half of all adults say middle-income people pay their fair share in federal taxes. Nearly four-in-ten (38%) say middle-income people pay too much in taxes, and 6% say they pay too little.

Pew 2Partisanship is closely linked to views about federal taxes, and the biggest gaps emerge over tax rates for the rich. A solid majority of Republicans say upper-income people pay either their fair share (44%) or too much (14%). Among Democrats, a strong majority (78%) say upper-income people pay too little in taxes; only 33% of Republicans agree. Some 13% of Democrats say upper-income people pay their fair share in taxes, while 4% say the rich are paying too much.

Partisans also divide over whether low-income people pay the right amount of taxes. A plurality of Democrats (48%) say low-income people pay too much, while Republicans are divided over whether low-income people pay their fair share (34%) or too little (30%). Only 23% of Republicans say lower-income people pay too much.

These partisan differences fade away on the issue of middle-class taxes. Democrats and Republicans have nearly identical views about the tax burden faced by middle-income Americans. Roughly half say middle-income people pay their fair share in taxes (52% of Republicans and 51% of Democrats). Nearly four-in-ten say middle-income people pay too much in taxes (39% of Republicans and 37% of Democrats). Very few from either party say middle-income people pay too little (3% of Republicans and 8% of Democrats).

Tax Foundation: Media Leaves Out Key Things in Covering Poll Showing Support for Taxing Rich:

[A]s tax policy goes, it offers nothing new. Much of the media coverage is leaving out a few key points:

  • The survey did not ask respondents what they think the rich should pay, or what the rich pay now. 
  • Nearly all Americans view the wealthy as someone else, which is why support for taxing them is higher in abstract questions than in actual proposals.
  • Support for increasing taxes on the rich has been dropping over time, not increasing.

What's clear is that issues of tax complexity, fairness, and burdens continue to be important to the American people. The debate over the economic growth impact of higher tax rates is also an important one. But a poll showing that Americans abstractly support taxing someone who is not them is nothing new.

August 30, 2012 in Tax, Think Tank Reports | Permalink | Comments (8) | TrackBack (0)

Romney Girl: 'Life Is Taxless'

Tech News You Use: Extend the Range of Your Wi-Fi Network

RouterPC World: How to Extend Your Wi-Fi Network: Tips and Tricks to Boost Your Wireless Network Range at Home or in the Office:

If you’re not getting the range you want from your home or office wireless network, there are many ways you can go about expanding your coverage. In this guide we’ll discuss some of the most popular methods, many of which involve upgrading and purchasing new gear (always a fun topic). Before you spend a cent, make sure to check out our tips on how to fix your Wi-Fi network to see how you may be able to get better Wi-Fi coverage from changing your router’s channel or placement. If those tips don't do the trick, keep reading for a few more specific ways to extend the range of your wireless network.

August 30, 2012 in Legal Education, Miscellaneous, Tax | Permalink | Comments (1) | TrackBack (0)

Treating REIT Investors Like LLC/LLP Investors

Carson Siemann (J.D. 2012, Seton Hall), Promoting Equity for REIT Investors, 36 Seton Hall Legis. J. 271 (2012):

This Article proposes that Congress should amend subchapter M of Chapter 1 of the Internal Revenue Code to make the basis limitations to REIT investors more similar to that of investors in limited liability partnerships or limited liability corporations (“LLCs”). This would promote more fairness in the tax system, and encourage more individuals to invest in REITs, rather than more leveraged alternative real estate purchase structures. Part II of this Article outlines the tax structure of a REIT and what is required of an entity in order to qualify as one for tax purposes. Part III discusses the legislative history of REITs and what purpose they were meant to serve. Part IV discusses why REITs do not fully accomplish their intended purpose. Part V details the disastrous consequences of over-investment in real estate, which occurred, at least in part, due to excessive debt-financing. Part VI offers proposed legislative changes that would further encourage individual investors of modest means to take greater advantage of the tax and diversification benefits of real estate through REITs.

August 30, 2012 in Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

Wednesday, August 29, 2012

Mitt Romney's Tax Mysteries: A Reading Guide

Pro Publica:  Mitt Romney’s Tax Mysteries: A Reading Guide:

Last week, the website Gawker published more than 900 pages of documents from Bain Capital, the private equity firm Mitt Romney founded, and headed from 1984 until 1999. The document dump didn't reveal much about Romney's personal investments, but it added a bit more to the pressure on Romney to release more of his tax returns. Romney and his wife Ann have repeatedly rebuffed such calls. In a primary debate in January, Romney said he'd paid "all the taxes that are legally required and not a dollar more."

So what do we know about how he avoided that extra dollar? For an overview of the questions surrounding Romney's tax strategies, see Vanity Fair's comprehensive story Where the Money Lives, and this [plus this] commentary from tax lawyers Edward Kleinbard and Peter Canellos. We've also rounded up the best reporting on the central controversies.

  • What's Been Disclosed?
  • Romney's Bain Career
  • Romney's Tax Rate
  • Overseas Accounting
  • Romney's Children's Trust
  • Romney's Enormous IRA
  • Blind Trusts
  • Rafalca the Horse

August 29, 2012 in Political News, Tax | Permalink | Comments (0) | TrackBack (0)

Feldstein: Romney's Tax Plan Can Raise Revenue

Wall Street Journal op-ed:  Romney's Tax Plan Can Raise Revenue, by Martin Feldstein (Harvard University, Department of Economics):

Mitt Romney's plan to cut taxes and offset the resulting revenue loss by limiting tax breaks has been attacked as "mathematically impossible." He would reduce all individual income-tax rates by 20%, eliminate the Alternative Minimum Tax and the estate tax, and limit tax deductions and loopholes that allow high-income taxpayers to reduce their tax payments. All this, say critics, would require a large tax increase on the middle-class to avoid raising the deficit.

Careful analysis shows this is not the case.

The critics' claims are based on calculations by the Tax Policy Center (update here) ... , which used a computer model to forecast personal tax revenue and AMT liabilities of taxpayers at each income level in 2015. Such forecasts are inevitably speculative.

To avoid the resulting uncertainties, I decided to analyze the Romney plan using the most recent IRS data, which is based on tax returns for 2009 and published in the current issue of the IRS quarterly publication. (Although 2009 was a low-income year because of the recession, using that year is preferable to looking back to some earlier period.) ...

Since broadening the tax base would produce enough revenue to pay for cutting everyone's tax rates, it is clear that the proposed Romney cuts wouldn't require any middle-class tax increase, nor would they produce a net windfall for high-income taxpayers. The Tax Policy Center and others are wrong to claim otherwise.

The Romney plan can reduce the current tax system's distortions, increasing national income in the short run and economic growth in the years ahead. That was the key to the very successful Reagan tax cuts of 1986. It was also the tax-reform strategy embraced by the bipartisan Bowles-Simpson commission in 2010. And it could put the economy back on the right track in 2013.

Update: Tax Vox Blog: Feldstein’s Analysis Doesn’t Refute TPC Findings, It Confirms Them:

Romney economic adviser Martin Feldstein attempts to contradict our finding. Instead, his analysis actually confirms our central result. Under the stated assumptions in Feldstein’s article, taxpayers with income between $100,000 and $200,000 would pay an average of at least $2,000 more.

August 29, 2012 in Political News, Tax | Permalink | Comments (5) | TrackBack (0)

Mehrotra: The Early Columbia School of Taxation and Development

Ajay K. Mehrotra (Indiana), From Seligman to Shoup: The Early Columbia School of Taxation and Development, in The Political Economy of Transnational Tax Reform: The Shoup Mission to Japan in Historical Context (Cambridge University Press, 2012):

In 1949, the Columbia University economist Carl Sumner Shoup helped lead a post-World War II tax mission to Japan. One of the principal goals of the mission was to assist in the reconstruction of the Japanese fiscal system. As part of this mission, Shoup brought with him not only his experience as an academic economist and longtime advisor to the U.S. Treasury Department, but also his deep intellectual commitment to fundamental tax reform. Throughout his career Shoup applied economic ideas about public finance to the practical issues of improving fiscal, political, and administrative institutions in redeveloping and lesser-developed nation-states. In many ways, though, Shoup was the culmination of a multi-generational tradition of research, scholarship, and policy guidance that can be described loosely as the Columbia school of taxation and development. This essay, which is a chapter in a forthcoming edited volume on the Shoup mission to Japan, provides a brief intellectual history of the Columbia school. More specifically, this chapter traces the genealogical connection between the type of economic institutionalism that was prominent at Columbia in the early twentieth century and Shoup’s specific ideas about taxation and development. The aim is to provide some historical perspective on the principles and proposals that were central to the many Shoup tax missions and to his overall vision of a “prescriptive” or “political economy” branch of public finance.

August 29, 2012 in Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

Chemerinsky Responds to Tamanaha's Criticism of UC-Irvine's Quest for Top 20 Status

UC-Irvine LogoFollowing up on yesterday's post, Tamanaha: UC-Irvine's Original Sin: Chasing Prestige at the Expense of Public Service: Erwin Chemerinsky (Dean, UC-Irvine), A Response to Brian Tamanaha:

Brian Tamanaha criticizes me and UCI Law School for making the choice to create a top 20 law school. In his book, Professor Tamanaha argues that we should have created a low cost law school instead. ...

First, all of the goals that Professor Tamanaha identifies in his book – maximizing the opportunity for jobs for our students, especially jobs that will allow students to pay back any loans, best serving the profession and the community – are best achieved if we succeed in being a top 20 law school. ...

Second, had we followed Professor Tamanaha’s advice we could have achieved none of this and would have created a not very good fourth tier law school. Professor Tamanaha criticizes the salaries we paid, matching the salaries of those we hired at their prior schools. He says that we could have hired other faculty more cheaply. But we certainly could not have attracted the kind of faculty who have come to UCI without matching their salaries. ...

But even more importantly, his approach – whether for UCI or other law schools – would lead to a poor legal education. ...

Professor Tamanaha makes many important points in his book. But I am baffled as to why he singled out UCI and me for criticism for aspiring to create a top school. The irony is that had we followed his approach we would have created a not very good fourth tier school and his most powerful criticisms are directed at such schools. By seeking to create a top school, we are best serving our students, our community, and hopefully the profession as well.

Paul Horwitz (Alabama), Tamanaha vs. Chemerinsky:

I am far from persuaded by Chemerinsky's arguments.

Chemerinsky's core argument, one that is all too common in our profession and within our social class, is that it is essential for law schools to do "well" by conventional measures in order to do "good." There is some justice to that: as he writes, in a credential-obsessed environment, "public interest places can be as elitist in their hiring as firms and being a top tier law school is crucial if we are going to get our students public interest jobs." But the question, to me, is 1) whether the cost of doing "well" outweighs its putative benefits toward the goal of having a successful public service-oriented law school; and 2) whether Chemerinsky, as Tamanaha argues, sets up a false dichotomy between either having "a 'top 20' law school or a 'fourth tier' law school." This leaves out the possibility of genuinely innovating: of having a school that attempts to defy those categories altogether and focuses instead rigidly on the single goal of designing a fully public service-oriented law school. The subject matter and prestige of the professors Chemerinsky hired seems to have relatively little to do with that goal. In the way that liberal elites or elites of any kind do, it seems to me to end up accepting as a given, and benefiting from, all the conventional values of success and prestige that are part of the current system and have served its prominent faculty so well, until in the end the goal that was supposed to drive the whole enterprise becomes something closer to the cherry on top.

Perhaps if we let go of some of our endless elitism, there would have been more room for both schools to either accept -- or challenge altogether -- what it means to be a "lower-tier" school, and for Irvine in particular to present us with a genuinely different model of what legal education means.  

John Steele:

One of the commenters asked about what innovations were possible. Five years ago at Tax Prof Blog, Paul Caron ran a series about advice for Dean Chemerinsky, and the various posters had a wide mix of suggestions, from, essentially, "here's how to chase the traditional type of prestige" to "do something quite different." Now that UCI has been up and running, it's interesting to go back and re-read that advice.

August 29, 2012 in Legal Education | Permalink | Comments (1) | TrackBack (0)

3d Circuit Reverses Tax Court in Atlantic City Historic Rehabilitation Tax Credit Case

The Third Circuit on Monday reversed the Tax Court (136 T.C. No. 1 (2011)) and held that Pitney Bowes Inc., a private equity investor in the Historic Boardwalk Hall partnership that was used to rehabilitate the Atlantic City landmark of the same name, was not a bona fide partner and thus could not claim federal historic rehabilitation tax credits. Historic Boardwalk Hall LLC. v. Commissioner, No. 11-1832 (3d Cir. Aug. 27, 2012). (Hat Tip: Jeffrey Davis.)

August 29, 2012 in Tax | Permalink | Comments (0) | TrackBack (0)

Cummings: Reorganization Business Purpose

Tax Analysts Jasper L. Cummings, Jr. (Alston & Bird, Durham, NC), Reorganization Business Purpose, 136 Tax Notes 1069 (Aug. 27, 2012):

In this article, Cummings explains how corporate taxpayers can avoid having to conjure up a business purpose for an acquisitive reorganization, other than the acquisition.

All Tax Analysts content is available through the LexisNexis® services.

August 29, 2012 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Court Affirms Dismissal of Alum's Defamation Lawsuit Against Stanford Law School

Stanford Law School LogoNational Law Journal:  Appeals Court Sides with Stanford Against Graduate:

A California appeals court has affirmed the dismissal of a defamation and retaliation lawsuit brought against Stanford Law School by a graduate who claimed that a law professor blacklisted her with San Francisco Bay Area law firms.  [Viswanathan v. Leland Stanford Jr. University, Nos. H036960, H037048 (CA Ct. App. 6th App. Dist. Aug. 24, 2012)]

A three-judge panel of the Sixth District Court of Appeals upheld a trial court's ruling that plaintiff Usha Viswanathan had supplied insufficient evidence to move forward. The court issued the unpublished opinion on August 24. ...

Viswanathan has a long history of litigation against her alma mater and professor Robert Weisberg. She first sued the school in 1997, claiming it did not steer minority women toward the same job opportunities as it did white students. That suit was dismissed in 2001, as were several subsequent claims by Viswanathan that the school retaliated against her because of her litigation.

Viswanathan sought a temporary restraining order against Weisberg in 2006, alleging that he had orchestrated "hang-up" calls to her phone and had students monitor her in the law school library, according to the opinion. The judge found insufficient evidence to grant the order.

Viswanathan again sued the law school and Weisberg in 2009, alleging that he had systematically discouraged law firms from hiring her for at least eight years. Her suit argued that Weisberg carries significant clout among Bay Area legal employers.

The complaint claims that she had pretended to interview with one law firm in 2009 and asked Stanford to send a transcript. The firm received a computer-generated voice mail that called Viswanathan a "dangerous personality" and claimed she stalked a Stanford professor, the complaint says.

According to that complaint, Viswanathan hadn't held a full-time legal job in eight years, with the exception of a one-year stint at a small firm that laid her off in late 2008. ...

The court concluded:

Clearly plaintiff has experienced considerable emotional and professional challenges since her graduation from Stanford Law School in 1994. Nevertheless, defendants established that because plaintiff would not be able to prove the elements of her defamation and related claims, they were entitled to judgment as a matter of law.

August 29, 2012 in Legal Education | Permalink | Comments (0) | TrackBack (0)

Abreu & Greenstein: A Better Way to Understand the Definition of Income

Alice G. Abreu Florida Tax Review(Temple) & Richard K. Greenstein (Temple), It’s Not a Rule: A Better Way to Understand the Definition of Income, 13 Fla. Tax Rev. ___ (2012):

In a recent article Professor Douglas Kahn explores a particular dissonance between the positive and very broad definition of income that includes all realized accessions to wealth, and what the government can and does actually attempt to tax. [Exclusion from Income of Compensation for Services and Pooling of Labor Occurring in a Noncommercial Setting, 11 Fla. Tax Rev. 683 (2011).] He then offers two limiting principles, which he posits operate as exclusions and thus eradicate the gap. Specifically, Professor Kahn suggests that the dissonance vanishes if we understand that “the income tax operates only on commercial transactions” and, as a corollary, that “joint efforts should not be treated as exchanges of services but rather as a jointly conducted activity,” which does not produce income “[w]hen the common goal has no business connection.” Professor Kahn derives these principles by examining a series of provocative hypothetical problems and suggests that these principles explain why a number of items that would seem to come within the broad positive definition of income are not in fact subject to tax despite the absence of a statutory exclusion.

In Defining Income [11 Fla Tax Rev. 295 (2011)], an article we recently published, we argued that the desire for theoretical precision that prompts articles such as Professor Kahn’s has led to a long tradition of interpreting the definition of income as a rule. We proposed as an alternative that the definition of income be thought of as a standard — specifically, that questions about whether a particular accession to wealth constitutes income be answered by employing an all-things-considered inquiry based on the values relevant to federal income tax. Our claim was that treating income as a standard effectively addresses the puzzling gap between what the broad positive definition of income would seem to include and what is actually taxed.

The commercial/noncommercial distinction that shapes Professor Kahn’s proposed principles functions as a rule. In this Essay we propose a thought experiment: What if we were to think about the problems Professor Kahn poses from the perspective of income-as-standard? Doing so would allow us to explore the utility of such an approach concretely. We therefore consider the precise issues Professor Kahn discusses, but use an income-as-standard approach. Having contrasted the two approaches, we return to the conclusion we reached in Defining Income: standards have important virtues that make them superior to rules for resolving some fundamental questions in federal income tax law. Contemporary tax analysis often assumes that all tax formulations are rules; we believe we have shown that while many are, income is not.

August 29, 2012 in Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

Regulating the Duty of Loyalty for Nonprofit Corporations Through the Intermediate Sanctions Tax Regulations

Carly B. Eisenberg (Nixon Peabody, Boston) & Kevin Outterson (Boston University), Agents Without Principals: Regulating the Duty of Loyalty for Nonprofit Corporations Through the Intermediate Sanctions Tax Regulations, 5 J. Bus. Entrepreneurship & L. 243 (2012):

Delaware corporate law imposes a duty of loyalty on officers and directors as a mechanism to regulate and deter self-dealing transactions. In nonprofit corporations, however, there are generally no shareholders with direct financial incentives to monitor against self-dealing. In the absence of shareholders and other principals, Congress and the IRS have articulated duty of loyalty rules for nonprofits that reach far beyond those applied to the for-profit world — most prominently the § 4958 intermediate sanctions. This article identifies the persons who owe a duty of loyalty to a nonprofit corporation, the applicable fiduciary standards for violating the duty of loyalty, and the remedies, procedures, and exoneration provisions under these fiduciary rules. While § 4958 and Delaware corporate law cover similar territory, they take remarkably different paths. By comparing the Tax Code with Delaware corporate law, it is readily apparent that, in the absence of shareholders, tax rules police the duty of loyalty for nonprofits more strictly than Delaware corporate law.

August 29, 2012 in Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

Tuesday, August 28, 2012

Emory Refuses to Audit Law School Data Despite Undergrad Rankings Scandal

Emory LogoFollowing up on my previous post, Emory Intentionally Cheated on Rankings for More Than Ten Years: Atlanta Journal-Constitution, Emory: No Need to Review Grad School Data:

Emory University has no plans to audit the data used to rate its graduate programs, even though leaders recently revealed the college submitted inflated undergraduate admissions data used by rankings publications.
College officials also refused to release the investigative report about the inflated data. As a private university Emory doesn’t have to share the report, but Claremont McKenna College, another private college caught in a similar scandal, posted its findings online.

“I’m puzzled they didn’t release the report,” said Brian Kelly, U.S. News & World Report Editor and Chief Content Officer. “If I’m a consumer, I’m suspicious.” U.S. News is one of several publications that received Emory’s incorrect information. It didn’t effect Emory’s No. 20 ranking, he said.

Still, Kelly questioned why Emory doesn’t take the initiative and review its graduate programs. Various publications rank law, business and medical schools.  ....

"These reporting issues concerned only undergraduate students," spokeswoman Nancy Seideman said in an email. "Emory's graduate and professional programs utilize separate admissions offices and procedures, and these findings in no way relate to data concerning graduate and professional admissions."
Kelly, of U.S. News, said Emory is among several colleges that have had problems with law school rankings, particularly in the area of employment rates for graduates. When U.S. News released law school rankings in March 2011 Emory dropped eight places to No. 30. The school rebounded to No. 24 this year when there were several big jumps.

When Emory dropped to 30, law school leaders blamed the decline on ranking methodology changes, even though similarly ranked schools didn’t have steep declines. U.S. News said new calculations provided a more accurate reflection of graduates’ employment.

Law schools at Villanova University and University of Illinois have been censured by the ABA for intentionally publishing false data about its students. The ABA also fined Illinois $250,000.

August 28, 2012 in Law School Rankings, Legal Education | Permalink | Comments (0) | TrackBack (0)

Symposium: Federal Budget and Debt Reduction

Louisville University of Louisville Law Review Symposium, Federal Budget and Debt Reduction, 50 U. Louisville L. Rev. 577-697 (2012):

August 28, 2012 in Scholarship, Tax, Tax Conferences | Permalink | Comments (0) | TrackBack (0)

Tamanaha: UC-Irvine's Original Sin: Chasing Prestige at the Expense of Public Service

UC-Irvine LogoFollowing up on Friday's post, Chemerinsky Dismisses Tamanaha's Call for High-Quality, $20,000 Per Year Law Schools: Balkinization:  Why UC Irvine Went Wrong: Chasing Prestige at the Expense of Public Service, by Brian Tamanaha (Washington U.):

In Failing Law Schools, for one critical reason I argue that, despite creating an excellent law school, UC Irvine went wrong: it is now among the most expensive law schools in the country (2012: $47,000 resident, $53,000 non-resident). When you add estimated annual living expenses of about $20,000, students will pay $200,000 for an Irvine law degree, and the average debt of the class of 2015 will exceed $100,000.

Students with debt that large are compelled by financial necessity to pursue corporate law jobs. ... Irvine law professors can saturate the atmosphere and curriculum with public service—it doesn’t matter. Irvine students will be forced to work in corporate law—and the many students who don’t land these positions will struggle under a huge debt. That is the reality of it. The “public service” goal was doomed, I argue in the book, by Dean Chemerinsky’s determination to create a "top 20" law school right out of the box. To achieve this goal, he recruited law professors from top law schools, who come at a high price.

An op-ed in the LA Times penned by Dean Chemerinsky in 2010 explains Irvine's high salary scale:

Over the last few weeks, I have negotiated salaries with superb professors we are attempting to recruit who are currently teaching at Harvard, Northwestern and Yale. The University of California must match their current salaries or they will not come. As much as I love living in Southern California, I could not have afforded to leave Duke University if it meant taking a substantial pay cut.

If you are recruiting against top law schools, you pay top dollar for professors. Publicly available UC salary records reveal that Irvine law professors are very well compensated (two received gross compensation topping $300,000 in 2011). Under the current economic model of law schools, I wrote in the book, “affordability and elite status are mutually exclusive.”

Understandably upset by my critical comments about UCI, Dean Chemerinsky has made two recent rebuttals: You Get What You Pay For in Legal Education and Law Prof’s Ideal, Affordable Law School Not Possible. In neither response does he contest my assertion that UCI grads (class of 2015) will be forced by their debt burden to seek corporate law jobs regardless of a desire they might have to work in public service.

He insists that tuition must be in the $50,000 range if UCI is to land in the top 20. On that point, he and I agree. What Dean Chemerinsky does not explain, however, is why it was necessary to create a “top 20” law school. ... I am skeptical of his suggestion that there were only two options: create a “top 20” law school or a “fourth tier” law school. One way to have kept costs down with no significant loss in faculty talent would have been to recruit top professors from excellent law schools with a lower pay scale (Alabama, Florida State, Georgia, North Carolina, William & Mary, etc.) rather than from Harvard, Northwestern and Yale. But he went for the prestige.

[T]here is something vaguely discomfiting about a law school that urges its students to engage in public service—which requires a significant financial sacrifice on their part—while professors are paid their market value; high professor pay adds to the debt burden, making public service work that much harder for graduates to manage. Although Irvine professors are fully entitled to earn market value, what results is in tension with their advocacy of public service.

August 28, 2012 in Law School Rankings, Legal Education | Permalink | Comments (5) | TrackBack (0)

Math, Taxes, and the War on Women

Bloomberg Video: The Broken Law School Rankings

University of British Columbia Seeks to Hire a Tax Prof

UBCThe University of British Columbia Faculty of Law in Vancouver, B.C. Canada seeks to hire a Tax Prof, either at the Assistant or Associate Professor level or as a Canada Research Chair in Law (Tier 2):

Applicants should submit (1) a cover letter indicating interest in [the position] that identifies the applicant’s academic and research accomplishments and any teaching experience; (2) a curriculum vitae; (3) the candidate’s undergraduate, law and graduate transcripts; (4) the names of four references; and (5) evidence of teaching effectiveness, such as evaluations, if available.

August 28, 2012 in Tax, Tax Prof Jobs | Permalink | Comments (0) | TrackBack (0)

SSRN Tax Professor Download Rankings

SSRNSSRN has updated its monthly rankings of 750 American and international law school faculties and 3,000 law professors by (among other things) the number of paper downloads from the SSRN database.  Here is the new list (through August 1, 2012) of the Top 25 U.S. Tax Professors in two of the SSRN categories: all-time downloads and recent downloads (within the past 12 months):




All-Time Downloads


Recent Downloads


Reuven Avi-Yonah (Mich.)


Ed Kleinbard (USC)



Paul Caron (Cincinnati)


Reuven Avi-Yonah (Mich.)



Louis Kaplow (Harvard)


Ted Seto (Loyola-LA)



Vic Fleischer (Colorado)


Paul Caron (Cincinnati) 



James Hines (Michigan)


Katie Pratt (Loyola-L.A.)



Ted Seto (Loyola-LA)


Adam Chodorow (Ariz. St.)



Dennis Ventry (UC-Davis)


Carter Bishop (Suffolk)



Richard Kaplan (Illinois)


Jen Kowal (Loyola-LA)



David Walker (Boston U.)


Louis Kaplow (Harvard)



Chris Sanchirico (Penn)


Bridget Crawford (Pace)



David Weisbach (Chicago)


Herwig Schlunck (Vand.)



Carter Bishop (Suffolk)


David Gamage (UCBerkeley)



Francine Lipman (UNLV)


Christopher Hoyt (UMKC)



Katie Pratt (Lloyola-L.A.)


Brad Borden (Brooklyn)



Herwig Schlunck (Vand.)


Wendy Gerzog (Baltimore)



Robert Sitkoff (Harvard)


Erik Jensen (Case Western)



Ed McCaffery (USC)


Richard Kaplan (Illinois)



Brad Borden (Brooklyn)


James Hines (Michigan)



Jen Kowal (Loyola-L.A.)


David Weisbach (Chicago)



Bridget Crawford (Pace)


Francine Lipman (UNLV)



Wendy Gerzog (Baltimore)


Dan Shaviro (NYU)



Steve Bank (UCLA)


Vic Fleischer (Colorado)



Dan Shaviro (NYU)


Dennis Ventry (UC-Davis)



Erik Jensen (Case Western)


Marty McMahon (Florida)



Michael Knoll (Penn)


David Walker (Boston U.)


Note that this ranking includes full-time tax professors with at least one tax paper on SSRN, and all papers (including non-tax papers) by these tax professors are included in the SSRN data.

Continue reading

August 28, 2012 in Scholarship, Tax, Tax Prof Rankings | Permalink | Comments (0) | TrackBack (0)

Poll: 53% Favor Raising Taxes to Save Social Security

Social-securityA new Associated Press-GfK poll reports on public attitudes to solve social security's long-term financial problems:

  • 53% favor raising taxes, 36% favor cutting monthly benefits
  • 53% favor raising the retirement age, 35% favor cutting monthly benefits

47% trust Barack Obama to do a better job on Social Security, and 44% trust Mitt Romney more (within the poll's 3.9% margin of error). (Hat Tip: Francine Lipman.)

August 28, 2012 in Tax | Permalink | Comments (6) | TrackBack (0)

Cherry: Charitable Organizations, Commercial Activity, and Social Entrepreneurship

Jaclyn Cherry (South Carolina), Charitable Organizations and Commercial Activity: A New Era. Will the Social Entrepreneurship Movement Force Change?, 5 J. Bus. Entrepreneurship & L. 345 (2012):

The purpose of this article is to take a broad look at where we are now as a result of the continuing confusion regarding the “commerciality doctrine.” It will focus on three areas influencing and defining organizations that are struggling with the law in this sector: 1) it will briefly define commercial activity in terms of social entrepreneurship and provide examples of organizations that have entered this hybrid sector as L3C Organizations and B Corporations; 2) it will give an overview of the law that has developed as the “commerciality doctrine;” and 3) it will discuss the UBIT and suggest that this test needs to be utilized by courts in conjunction with the “commerciality doctrine” for there to be any semblance of order for nonprofits to follow. Finally, this article concludes by suggesting that changes within the system are overdue. It suggests a three part analysis requiring that the IRS and courts apply the UBIT tests in coordination with, and not separate from, the “commerciality doctrine” (with a new definition of “substantial commercial activity”); second, that the “commerciality doctrine” be defined more clearly by synthesizing the courts tests from Presbyterian and Reformed Publishing and Airlie Foundation; and third, that an “intermediate sanction” type penalty be developed which would be triggered by failure to meet the above tests, before the loss of tax exempt status occurs. If nothing is done to address this issue, which may well end up being the case, then organizations will drift between the nonprofit and for-profit worlds in a very counter-productive manner for the sector and for the individuals they are created to benefit.

August 28, 2012 in Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

Monday, August 27, 2012

Tax Planks in 2012 Republican Platform

Republican Platform CoverTax Relief to Grow the Economy and Create Jobs

Taxes, by their very nature, reduce a citizen’s freedom. Their proper role in a free society should be to fund services that are essential and authorized by the Constitution, such as national security, and the care of those who cannot care for themselves. We reject the use of taxation to redistribute income, fund unnecessary or ineffective programs, or foster the crony capitalism that corrupts both politicians and corporations.

Our goal is a tax system that is simple, transparent, flatter, and fair. In contrast, the current IRS code is like a patchwork quilt, stitched together over time from mismatched pieces, and is beyond the comprehension of the average citizen. A reformed code should promote simplicity and coherence, savings and innovation, increase American competitiveness, and recognize the burdens on families with children. To that end, we propose to:

  • Extend the 2001 and 2003 tax relief packages—commonly known as the Bush tax cuts—pending reform of the tax code, to keep tax rates from rising on income, interest, dividends, and capital gains;
  • Reform the tax code by reducing marginal tax rates by 20 percent across-the-board in a revenue-neutral manner;
  • Eliminate the taxes on interest, dividends, and capital gains altogether for lower and middle-income taxpayers;
  • End the Death Tax; and
  • Repeal the Alternative Minimum Tax.

American Competitiveness in a Global Economy

American businesses now face the world’s highest corporate tax rate. It reduces their worldwide competitiveness, encourages corporations to move overseas, lessens investment, cripples job creation, lowers U.S. wages, and fosters the avoidance of tax liability— without actually increasing tax revenues. To level the international playing field, and to spur job creation here at home, we call for a reduction of the corporate rate to keep U.S. corporations competitive internationally, with a permanent research and development tax credit, and a repeal of the corporate alternative minimum tax. We also support the recommendation of the National Commission on Fiscal Responsibility and Reform, as well as the current President’s Export Council, to switch to a territorial system of corporate taxation, so that profits earned and taxed abroad may be repatriated for job-creating investment here at home without additional penalty.

Fundamental Tax Principles

We oppose retroactive taxation; and we condemn attempts by activist judges, at any level of government, to seize the power of the purse by ordering higher taxes. We oppose tax policies that divide Americans or promote class warfare.

Because of the vital role of religious organizations, charities, and fraternal benevolent societies in fostering benevolence and patriotism, they should not be subject to taxation, and donations to them should continue to be tax deductible.

In any restructuring of federal taxation, to guard against hypertaxation of the American people, any value added tax or national sales tax must be tied to the simultaneous repeal of the Sixteenth Amendment, which established the federal income tax.

August 27, 2012 in Political News, Tax | Permalink | Comments (6) | TrackBack (0)

America the Undertaxed

Foreign AffairsForeign Affairs:  America the Undertaxed, by Andrea Louise Campbell (MIT, Department of Political Science):

The most important debates in U.S. politics today center on the cost and the role of government. Cutting taxes, limiting expenditures, and reducing debt have become the chief concerns of Republicans, whereas Democrats generally seek to preserve or even expand government spending and are willing to raise taxes to do so. The looming expiration of the George W. Bush tax cuts at the end of 2012 and the economy's weak recovery give these debates special urgency, as decisions made in the next few months are likely to shape the nation's economic, social, and political trajectory for years to come.

Behind each party's position lies not only a particular collection of interest groups but also a story about what the government's role in the U.S. economy is and what it should be. Democrats think Washington can and should play a more active part, using taxation, regulation, and spending to keep the economy growing while protecting vulnerable citizens from the ravages of volatile markets. Republicans, in contrast, think Washington already does too much; they want to scale government back to liberate markets and spur economic dynamism.

When mulling these stories, it can be useful to put U.S. fiscal policy in perspective. Compared with other developed countries, the United States has very low taxes, little redistribution of income, and an extraordinarily complex tax code. These three aspects of American exceptionalism deserve more attention than they typically receive. 

(Hat Tip: Ajay Mehrotra.)

August 27, 2012 in Scholarship, Tax | Permalink | Comments (9) | TrackBack (0)

Romney Tax Returns Show Strategy for Moving Money to Kids

Bloomberg:  Romney Tax Returns Show Strategy for Moving Money to Kids:

Republican presidential candidate Mitt Romney and his wife, Ann, have used sophisticated estate- planning techniques for more than a decade to minimize taxes and amass at least $100 million for their family outside of their estate.

The couple created trusts as early as 1995, when Romney was building wealth as chief executive officer of Bain Capital LLC. They packed one for their children with investments that stood to appreciate and set up another for charity that provides a tax deduction and income. The candidate’s retirement account, valued at as much as $87.4 million, may benefit his heirs for decades. “It’s beneficial for your kids and grandkids to push the money downstream,” said David Scott Sloan, chairman of the national private wealth services estate-planning practice at the law firm Holland & Knight LLP in Boston. “The Romneys appear to be doing things that are similar to what other high-net-worth families do.”

Wealthy couples use strategies allowed under the federal tax system such as moving assets to trusts so that the money may be subject to little or no gift and estate taxes, Sloan said. The Romney family trust is worth $100 million, according to the campaign. That money isn’t included in the couple’s personal fortune, which the campaign estimates at as much as $250 million.

August 27, 2012 in Political News, Tax | Permalink | Comments (2) | TrackBack (0)

Legal Aid Society Seeks to Sponsor ABA Tax Section Public Service Fellow

ABA Tax Section From the Legal Aid Society of New York:

The Legal Aid Society is interested in sponsoring an applicant for the ABA Section of Taxation Public Service Fellowship. The fellow would work with our Low-Income Taxpayer Clinic (LITC) to advocate for low-income taxpayers before the IRS and New York State Department of Taxation and Finance with respect to income tax issues, including but not limited to issues arising in connection with the Affordable Care Act health insurance premium and credit, other refundable credits, collection alternatives, misclassified employees, innocent spouse relief, and identity theft. Individuals who will receive their J.D. or L.L.M. in 2013, or recent graduates with experience in tax law are encouraged to apply. The Legal Aid Society’s LITC has provided assistance to thousands of low-income taxpayers since 2001 and works with other advocates in The Legal Aid Society and throughout New York City to address tax issues which affect low income New Yorkers. ...

Application by email is required and ... must be submitted by September 10, 2012. ... Email a resume and cover letter, fellowship proposal, law school transcript, list of references and writing sample. ... In the subject line of the email, please write “Tax Fellowship”.

August 27, 2012 in ABA Tax Section, Tax, Tax Prof Jobs | Permalink | Comments (1) | TrackBack (0)

Derivatives Markets and Social Welfare: A Theory of Empty Voting and Hidden Ownership

Jordan M. Barry (University of San Diego, School of Law), John William Hatfield (Stanford University, Graduate School of Business) & Scott Duke Kominers (University of Chicago, Becker Friedman Institute for Research in Economics), On Derivatives Markets and Social Welfare: A Theory of Empty Voting and Hidden Ownership:

The prevailing view among many economists is that derivatives markets simply enable financial markets to incorporate information better and faster. Under this view, increasing the size of derivatives markets only increases the efficiency of financial markets.

We present formal economic analysis that contradicts this view. Derivatives allow investors to hold economic interests in a corporation without owning voting rights, or vice versa. This leads to both empty voters — investors whose voting rights in a corporation exceed their economic interests — and hidden owners — investors whose economic interests exceed their voting rights. We show how, when financial markets are opaque, empty voting and hidden ownership can render financial markets unpredictable, unstable, and inefficient. By contrast, we show that when financial markets are transparent, empty voting and hidden ownership have dramatically different effects. They cause financial markets to follow predictable patterns, encourage stable outcomes, and can improve efficiency. Our analysis lends insight into the operation of securities markets in general and derivatives markets in particular. It provides a new justification for a robust mandatory disclosure regime and facilitates analysis of proposed substantive securities regulations.

August 27, 2012 in Scholarship, Tax | Permalink | Comments (1) | TrackBack (0)

Foundation Press Publishes 2012 Supplement to Federal Wealth Transfer Taxation

CoverThe late Paul McDaniel (Florida), Jim Repetti (Boston College), and I have published a 2012 Supplement (134 pages) to our two Federal Wealth Transfer Taxation (Foundation Press, 6th ed. 2009) books: our casebook and study problems book. Faculty, students, and other interested readers are welcome to download a free copy. Here is the Preface:

This supplement is designed to update our Casebook and accompanying Study problems book: Federal Wealth Transfer Taxation: Cases and Materials (6th ed. 2009), and Federal Wealth Transfer Taxation: Study Problems (6th ed. 2010). We hereby grant permission to users of Federal Wealth Transfer Taxation to distribute copies of this supplement to students, either in hard copy or in electronic form.

This supplement is current through July 1, 2012 and incorporates The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (Pub. L. No. 111-312, 124 Stat. 3296 (2010)), passed by Congress on December 16, 2010, and signed into law by President Obama on December 17, 2010.

We also have published a 2012 Supplement (63 pages) to our teacher's manual accompanying our Federal Wealth Transfer Taxation casebook and study problems book. The 2012 Supplement provides detailed answers to the new and revised study problems, as well as commentary on new and revised material in the casebook. Faculty who would like a free copy of the 2012 Supplement to our Teacher's Manual can email Jim or me.

August 27, 2012 in Book Club, Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

The 20 Most Innovative Law Schools

20 InnovativeThe September 2012 issue of The National Jurist lists The 20 Most Innovative Law Schools:

Driven by sharp criticism, a challenging job market and a significant drop in applications during the past two years, law schools are moving forward with innovative ideas that were quashed only a few years ago.

Law schools are experimenting with distance learning, alternative degrees and changes to the standard model of three years in the classroom. We invited every law school to explain how it is innovating its curriculum. More than 40 responded, with the results showing innovation is at an early stage, but growing at a fast pace. Legal educators are no longer just talking about change -- they are taking the first steps to make it happen.

Here, we celebrate the 20 law schools at the cutting edge -- those that are trying new things in an effort to improve legal education.

  • Arkansas-Little Rock
  • Denver
  • District of Columbia
  • Elon
  • Hamline
  • Hawaii
  • Illinois
  • Indiana-Bloomington
  • Loyola-L.A.
  • New York Law School
  • North Carolina
  • Ohio Northern
  • Penn State
  • Phoenix
  • Southwestern
  • Stanford
  • Syracuse
  • Thomas Jefferson
  • Tulane
  • Utah

August 27, 2012 in Law School Rankings, Legal Education | Permalink | Comments (2) | TrackBack (0)

WSJ: Citation Study Rankings Beset by Growing Manipulation by Authors and Journals

WSJWall Street Journal:  Journals' Ranking System Roils Research:

Growing pressure on scientific journals to increase their influence in the research world is pushing them to ever further lengths to play the system that ranks scholarly publications.

In July, a publication called Scientific World Journal retracted two papers about regenerative medicine, saying they had excessively cited another journal, Cell Transplantation.

At issue was the "impact-factor ranking," one of the most influential numbers in scholarship. The impact factor was invented more than 50 years ago as a simple way to grade journals, on the basis of how frequently their articles got cited in the literature.

But concerns have arisen that some journals' impact factor is artificially inflated by excessive citations -- which appears to be why the editors of Scientific World Journal retracted previously published work. ...

Thomson Reuters, which publishes the impact-factor numbers, suspended the rankings for both the Scientific World Journal and Cell Transplantation for two years, a blow to the researchers who publish in those journals.

The broader worry is that the once-obscure yardstick is now a ubiquitous tool for assessing scientific merit -- a job it wasn't designed to do, and whose use is open to manipulation. ...

The impact factor, or IF, is routinely used by researchers in deciding where to publish and what to read. It guides promotions, tenure decisions and funding committees around the world, who assume someone publishing in a high-impact journal must be doing superior work.

Thomson Reuters calculates the IF by dividing the number of citations of research papers in a journal in one year by the total number of papers published in the same journal in the two previous years. So while the IF captures the citation rate of a journal as a whole, it says nothing about the quality or veracity of any individual paper.

Nonetheless, more and more countries today use the IF system to grade scientists. A few years ago, Qatar University began offering cash bonuses to its academics linked to the IF of the journal in which they publish.

Critics say that pushes academics to seek trendy ields of research and to try to publish in journals with the highest IF, instead of those that offer the best audience for their work. "It distorts the entire scientific enterprise," says Fiona Godlee, editor of the British Medical Journal.

The IF is easily gamed, too. One in five academics in economics, sociology, psychology and business said they had been asked by editors to pad their papers with unnecessary citations to articles in the same journal, according to a study published in Science in February.

August 27, 2012 in Law School Rankings, Legal Education | Permalink | Comments (0) | TrackBack (0)

Romney Reaped Huge Tax Benefits From 'Active' Role at Bain Capital

Huffington Post:  Mitt Romney Reaped Huge Tax Benefits Based on 'Active' Role at Bain Capital:

When tax experts charged that he benefited from legally dubious tax avoidance strategies employed by Bain, his campaign noted that the investments are kept in a blind trust completely out of his control. ...

But according to his 2010 tax return, when the IRS comes calling in April, Romney has a different answer: The presumptive GOP nominee reaps lucrative tax breaks for "active" participation in the private equity firm he founded, as well as a host of other investments. ... For tax purposes, he claims an active status; for political purposes, he claims to have zero to do with the investments. ...

The distinction is valuable, for the IRS treats passive and active income and losses differently. If a passive investment loses money, the taxpayer can only write off that loss if passive gains have also been made and only at a 15% rate. But active losses can be written off at a 35% rate and deducted from the taxpayer's ordinary income. In other words, a taxpayer wants active losses, not passive losses. So by describing many of his investments as active, Romney saves himself millions of dollars in taxes.

With those active investments, he is also securing a tax break few Americans enjoy: When he wins, he's paying a 15% rate on the gain. When he loses, he's writing it off at 35%, meaning that tax policy is subsidizing Romney's risk in his Bain investments. In other words, Romney didn't build that, at least not without taxpayer backing. ... These kinds of deductions are only available to "active" participants in business partnerships. While Romney filed as an active participant for tax purposes, there is no evidence that he took part in Bain management decisions in 2010, and he has denied doing so. ...

"Governor Romney appears to be saying one thing to the American people and one thing to the IRS," Rep. Brad Miller (D-N.C.) said to The Huffington Post. "Right now we are just seeing inconsistent statements. The American people are entitled to know more than that. If there's a legalistic distinction, we are entitled to know what that is. ... Has he played too close to the line or over the line?"

It is also possible that these deductions are all legitimate expenses for Bain and the handful of Goldman Sachs subsidiaries in which Romney is a partner. But they all appear on a tax document where individuals usually list personal expenses, known as Schedule E. And listing personal expenses as business expenses is not allowed.

(Hat Tip: Francine Lipman.)

August 27, 2012 in Political News, Tax | Permalink | Comments (2) | TrackBack (0)

Sunday, August 26, 2012

TaxProf Blog Weekend Roundup

NY Times: Two-and-Twenty Tax Dodges

New York Times editorial:  Two-and-Twenty Tax Dodges:

Mr. Romney and his partners may have abused the tax system by paying far less in taxes than they should have.

Back in 2007, The New York Times published an editorial that explained what was wrong with the tax treatment of Bain-like pay. It cited the work of Victor Fleischer, a law professor at the University of Colorado, who had written a let-us-count-the-ways report on how private equity partners avoid taxes [Two and Twenty: Taxing Partnership Profits in Private Equity Funds, 83 N.Y.U. L. Rev. 1 (2008)].

In a nutshell, they collect a management fee on their funds of 2%, which is supposed to be taxed as ordinary income. And they collect performance fees, usually 20% of any profits, which – thanks to a loophole that should have been closed long ago – are taxed as capital gains, at a mere 15%, about the lowest rate in the tax code.

It is no secret that Mr. Romney has availed himself of the super-low capital gains rate on his Bain performance-fees – an obscene privilege, but not illegal. What the Gawker documents indicate is that the Bain/Romney tax avoidance went further than that.

In brief, it looks like four Bain funds in which the Romney family’s trusts are invested converted $1.05 billion in management fees — which should be taxed as ordinary income – into capital gains, which are taxed at the much lower rate. The tax savings: $220 million.

Mr. Fleischer was all over it, writing on his blog that “the Bain partners, in my opinion, misreported their income if they reported those converted fees as capital gains instead of ordinary income.” What would the IRS say? It is unclear, but Mr. Fleischer says the practice is illegal and has no doubt a court would agree if ever asked to rule on the question. What does Mr. Romney say? The campaign declined to comment.

August 26, 2012 in Political News, Tax | Permalink | Comments (0) | TrackBack (0)

NY Times: Tax Credits Shed Light on Romney

New York Times:  Tax Credits Shed Light on Romney, by James B. Stewart:

The presumptive Republican presidential nominee’s refusal to disclose more than his most recent two years of tax returns has spawned wide-ranging and sometimes far-fetched speculation from water coolers to talk shows. But a few tax experts are zeroing in on an esoteric corner of the tax code and pointing to some intriguing clues buried in the returns Mr. Romney has already revealed.

Mr. Romney has insisted that his returns from 2010, and preliminary returns for 2011 (until he provides a final version) are enough for voters to evaluate his fitness for office. But even though he has not released his returns from earlier years, the 2010 return sheds some light on those years.

That’s because Mr. Romney paid income tax to foreign countries, and as result claimed in 2010 a $129,697 foreign tax credit, which he used to offset taxes he owed in the United States. American taxpayers who claim the foreign tax credit are required to report their total foreign taxes paid and tax credits used for the previous 10 years. So that return contains foreign tax data going back to 2000.

The good news for Mr. Romney is the forms suggest that he paid at least some federal income tax every year, as he has said he did. He used the foreign tax credit every year to offset his taxes in the United States, and American taxpayers can’t use a tax credit if they owe no federal income tax. This casts even more doubt on the claim by the Senate majority leader, Harry Reid, attributed to an unnamed Bain Capital source, that Mr. Romney paid no income taxes during that time.

But the data does suggest that Mr. Romney was able to reduce his taxable income in 2009 to a very low level, and thus might have paid relatively little tax — even if it did, as Mr. Romney claims, amount to at least 13 percent of his taxable income. ...

Mr. Romney’s return shows how wealthy Americans with foreign earnings can sharply reduce their tax liability in the United States. In 2010 Mr. Romney reported $2.73 million of gross foreign income. On that amount, he paid foreign taxes of $67,173, or just 2.5 percent of his gross foreign income.

After all his deductions (including the kind of noncash charges that are central to all tax shelters, like depreciation) that multimillion-dollar sum declines to just $392,000 in taxable income. This amount appears on his federal tax return, but at his 13.9 percent effective rate, the federal tax on that income — $54,627 — was more than offset by a $129,697 tax credit for foreign taxes he paid in 2010 and earlier years.

Dan Shaviro (NYU), Has Romney Pid All the U.S. Federal Income Taxes That He Legally Owes?:

As usual, I feel half-apologetic about the degree of speculation that I am engaging in here.  But it's Romney's unprecedented tax return secrecy, and the inferences reasonably derived from it, that makes such speculation necessary.

August 26, 2012 in Political News, Tax | Permalink | Comments (1) | TrackBack (0)

Top 5 Tax Paper Downloads

SSRNThere is a bit of movement in this week's list of the Top 5 Recent Tax Paper Downloads, with a new #1 paper:

1.  [2123 Downloads]  Top Ten Myths of Medicare, by Richard L. Kaplan (Illinois)

2.  [1412 Downloads]  Taxation Without Representation: The Illegal IRS Rule to Expand Tax Credits Under the PPACA, by Jonathan H. Adler (Case Western) & Michael F. Cannon (Cato Institute)

3.  [314 Downloads]  Does the Taxing Clause Give Congress Unlimited Power?, by Erik M. Jensen (Case Western)

4.  [223 Downloads]  International Tax Competition and Coordination, by Michael Keen (International Monetary Fund) & Kai A. Konrad (Max Planck Institute for Tax Law and Public Finance)

5.  [194 Downloads]  Gift Tax Completion and Retained Powers, by Bridget J. Crawford (Pace)

August 26, 2012 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0) | TrackBack (0)

Reviving the American University With an 80% Rule

Forbes: Reviving the American University In One Easy Step:

Out of the lively discussion around my article, Killing–And Reviving–The American University in Five Easy Steps, came an interesting suggestion that could go a long way to fixing the situation in one easy step.

Debra Leigh Scott suggests that just as health care system is being required to show that 80% of healthcare insurance is spent on actual health care, rather than administration, so the university should be required to spend at least 80% of its budget on actual education, rather than administration, entertainment, sports and luxury amenities.

(Hat Tip: Greg McNeal.)

August 26, 2012 in Legal Education | Permalink | Comments (2) | TrackBack (0)

Saturday, August 25, 2012

WSJ: A Clue Emerges to Romney’s Gift-Tax Mystery

Wall Street Journal:  A Clue Emerges to Romney’s Gift-Tax Mystery, by Mark Maremont:

One of the mysteries surrounding Mitt Romney’s taxes is how the former private-equity executive managed to get $100 million into a family trust for his children without incurring federal gift taxes.

A potential clue may be found in a previously unreported 2008 presentation made by a partner at law firm Ropes & Gray LLP, which represents the GOP presidential nominee. It focuses on how private-equity executives could minimize gift and estate taxes by giving family members some of their “carried interest” rights, a major form of compensation that entitles private-equity executives to a slice of the firm’s future investment profits. ...

The attorney at Ropes & Gray wrote that in the 1990s and early 2000s estate-planning lawyers “commonly advised” that executives could claim a value of zero on these transfers of carried-interest rights for federal gift-tax purposes. He said the practice ended by 2005.

Gifts of carried-interest rights are common, but several estate-planning attorneys at major New York firms said they are puzzled by the claim that the rights ever could have been valued at zero, particularly at an established private-equity firm. They said long-standing rules require taxpayers to value all gifts at fair-market value, or what a willing buyer would pay a willing seller.

In response to a reporter’s questions, a Romney adviser said the presentation by the Ropes & Gray lawyer was aimed at educating other attorneys about industry practices, not a description of Ropes & Gray’s advice to clients. Based on the presentation, the adviser said, “you should not assume” that was the firm’s advice to clients or that Mr. Romney’s gift-tax returns ever valued carried-interest rights at zero. ...

Jay Waxenberg, an estate-planning attorney at Proskauer Rose LLP in New York who advises private-equity executives, said valuations “tend to be very low,” but he has never known anybody at an established firm claim a zero value. ...

In his 2008 presentation, the law firm partner, Marc J. Bloostein, said the basis for believing that carried-interest rights could have a zero gift-tax value stemmed partly from a 1993 IRS ruling related to income tax treatment of the rights. [Rev. Proc. 93-27, 1993-2 C.B. 343,] The IRS said taxpayers could claim the rights had no immediate value when they were received, but would have to pay capital-gains tax on any income that later flowed from them.

Mr. Bloostein indicated that gift-tax valuation practices changed by 2005, saying that although there was once “reason to think” that a zero valuation could be claimed, “it has become clear” that fair-market value is the correct standard and “it is advisable to engage a professional appraiser.”

August 25, 2012 in Political News, Tax | Permalink | Comments (3) | TrackBack (0)

Johnson: Settle Withholding by the Dollars, Not Control

Tax AnalystsCalvin H. Johnson (Texas), Settle Withholding by the Dollars, Not Control, 136 Tax Notes 949 (Aug. 20, 2012):

Current law requires withholding tax from compensation paid to employees but not to independent contractors. The current law definition of independent contractor is vague and arbitrary, with the standard using a tort standard of control. Withholding improves the efficiency of interim reports and tax collection, and increases tax compliance. Refunds improve the taxpayer’s attitude toward his government. The proposal discussed in this article would replace the employee/independent-contractor test with a bright-line rule. Withholding would be required of any employer with more than two fulltime workers. Households expected to pay more than $2,000 a month for one employee would also be required to withhold.

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August 25, 2012 in Scholarship, Tax | Permalink | Comments (1) | TrackBack (0)